The country’s resource-fuelled economic expansion has spurred strong growth in
car buying over the past year that has outlasted the expiration of tax
incentives introduced after the financial crisis in late 2008, which lapsed
in March.

Fifth market
Brazil was the world’s fifth-largest vehicle market last year after China, the
US, Japan and Germany, with 3.1m cars and light trucks sold last year.

Volkswagen, the second-biggest carmaker in the country after Italy’s Fiat,
expects the market to grow 7 per cent this year, and says that it could
surpass Germany on total vehicle sales.

"This year depends on how the market in Europe goes," Thomas Schmall,
president of VW do Brasil, told the Financial Times. "It might be the same,
but Brazil might overtake Germany."

GM
General Motors, the third-largest carmaker in Brazil, is forecasting total
industry sales of about 3.3m vehicles this year, a 5 per cent increase on a
year ago.

"We believe 5 per cent annual growth is sustainable for Brazil over the next
five years, with some upside given by the soccer world cup in 2014 and
Olympic Games in 2016," said Jaime Ardile, head of GM's Brazilian operation.
"This could make Brazil the fourth-largest auto industry in the world after
China, the US and Japan."

The rise of Brazil in the industry reflects the ongoing migration of
production capacity and investment from saturated developed countries to
faster-growing emerging ones.

PwC expects Germany's light vehicle market to decline by about 20 per cent
this year to 3.18m from just under 4m last year, and Brazil's to grow by
about 8 per cent to 3.3m.

"If you take the light vehicle market, we expect Brazil to overtake Germany
this year," said Michael Gartside, senior analyst with PwC Autofacts. But on
car sales alone - excluding light commercial vehicles - Germany would still
be a larger market than Brazil, he said.

Global carmakers are reporting that some of their biggest profits come from
Brazil amid strong economic growth, expanding credit, and growing demand for
entry-level cars from people new to the middle class.

However, Brazil's four big incumbent carmakers - Fiat, VW, GM and Ford Motor -
face increasing competition from Asian producers. South Korea's Hyundai and
China's Chery Automobile both plan to build plants in Brazil. The strong
Brazilian currency is fuelling expanding sales of imported cars.

Outselling Fiat
Mr Schmall said that VW aimed to outsell Fiat - which sells one in four light
vehicles in Brazil - as the market leader by 2011, depending on how fast the
market grew.

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